Area-Based Property Tax Systems: Current Practice and Equity Concerns
The area-based property tax has been gaining influence in developing and transitional countries around the world. This report first examines how the area-based tax is administered in thirty-eight countries according to statutes. Area-based assessment is more commonly used in rural areas than urban areas, for land than buildings, and with few adjustments. Over half the countries allow some local control. Next, a case study in Lithuania explores the equity implication of relying on an area-based tax as opposed to an ad valorem property tax. Overall, the horizontal and vertical equity of both methods are poor and the level of equity is sensitive to interquartile analysis. The relationships are, however, robust: 1) horizontal and vertical equity for detached housing are better under the area-based than market-based assessment and 2) horizontal and vertical equity for flats are better under market-based than area-based assessment.
This paper is accompanied by a compendium that provides an overview of the countries that currently implement some form of area-based property taxation or that allow for the local option of an area-based property tax. This compendium entitled, A Compendium of Countries with an Area-Based Property Tax, is posted on the Lincoln Web site.
Lincoln Institute of Land Policy Working Paper
© 2009 Lincoln Institute of Land Policy